A discussion with Mostafa Pakzad, Global Buisness Consultant at Pakzad Consuting Corporation. Mustapha Pakzad obtained his PhD in Computer Science from Newcastle University. He worked in the UK and US as a consultant to the IT industry before setting up Pakzad Consulting in London. Together with his team of business experts, they provide consulting services to companies globally in the fields of compliance, international payments and strategy.

Here is some excerpt from discussion between Riceoutlook and Mr Mostafa on Iran’s Rice Import

Riceoutlook: First of all your comments on Iran’s ban of rice import instead of its regular practice of duty hike?

Mostafa Pakzad, Pakzad Consutlting Corporation

M.Pakzad: The periodic high tariffs are imposed during harvest periods. On this occasion, the government has decided to impose a ban instead. This is because there is an over-stock of rice currently in the local market. The ban is meant to reduce the over-stock. We have had a high volume of imports this year already. The low exchange rates made available at the end of the previous presidency encouraged an over-purchase of rice. This means we have imported about 50% more than needed. The ban is due to the fact that the new government wants to clear the over-stock. As you know rice cannot be stored for much longer than one year. Any further import at this stage is likely to cause unhealthy competition.

Riceoutlook: When this ban is expected to withdrawn by Iran’s government?

M.Pakzad: The ban should be lifted around February 2015.

Riceoutlook: Is Iran looking for any alternative for rice purchase other than India?

M.Pakzad: No, not at all. The reason is that Iranians like long grain (Basmati) rice. Only India has long grain rice. Of the 1.2 million tons of rice imported into Iran per year, only around 200 thousand tons are second rate quality rice from for example Thailand. This type of rice is used in places like the army. The vast majority of consumption is high grade long grain rice, and it is only India that can provide this. Pakistan rice is almost same grade as Indian. However, there are great health concerns for Pakistan rice as far as the Iranian authorities are concerned.

Riceoutlook: During March 2014, Iran has revised the acceptance level of basmati rice from 150 parts per million to 120 p.p.m and wanted Indian exporters to specify the level of arsenic on each pack for identification. Will this decrease Indian basmati export to Iran?

M.Pakzad: Hopefully not, provided Indian rice exporters take action to comply with new regulations. The government is now asking for GMP health certificate since it is concerned about the standards in which rice is warehoused in India. We have had recent visits to Iran by delegations from Indian Ministry of Commerce and other organizations asking the Iranian authorities for less strict regulations regarding rice imports. Of course these strict measures have actually benefited reputable Indian exporters since it is well known that they uphold high health standards. So they have been the winners in all this. Naturally import volumes have been affected by these tightened regulatory oversights too.

Riceoutlook: India exports its 30% of basmati rice to Iran and as now Iran has increased its import duty from 22 % to 40% which is likely to cost her hugely this year. Do you see the need for India to diversify its overseas basmati sale?

M.Pakzad: The Indian rice production volume is 4.5 million tons per year. About 2 million tons goes to Saudi Arabia due to Hajj causing higher consumption, 1.2 million tons comes to Iran and about 300 thousand tons goes to UAE and other places. It is therefore not easy for India to shift exports to countries other than Iran. It would be better to aim at satisfying government regulations and preserving the market. We must also note that in order to facilitate payment to Indian rice exporters, India needs to take measures to speed up access to Iranian funds held in local Indian banks.

Riceoutlook: Is there any change in the rice consumption pattern in Middle East?

M.Pakzad: In Iran, we have an average 3 to 5% increase in national demand per year. More generally, rice is a staple food for over half of the world’s population. Rice accounts for over 20 percent of global calorie intake. Over 90 percent of the world’s rice is produced and consumed in the Asian Region by 6 countries (China, India, Indonesia, Bangladesh, Vietnam and Japan) comprising 80% of the world’s production and consumption. Recently, Asian trend shows that production and export has been increasing but the consumption has been decreasing. With growing prosperity and urbanization, per capita rice consumption has started to decline in the middle and high-income Asian countries like Japan, Taiwan and the Republic of Korea. But, nearly one- fourth of the Asian population is still poor and has considerable unmet demand for rice such as Afghanistan, North Korea, Nepal and Vietnam. It is in these countries that rice consumption could grow faster. The decreases of rice consumption in Asian region are because of the increases in per capita income that leads income elasticity’s of demand for rice as a normal good decreasing as well as westernization in diet.

Pakzad Consulting Corporation

Riceoutlook: What do you think when Iran will resume its rice import? Will there be any change in the purchase percentage from India, Thailand & Pakistan?

M.Pakzad: Thailand has no long grain rice and it therefore poses no threat to Indian rice exporters to Iran. Pakistan rice is almost same grade as Indian. However, the health concerns are even greater for Pakistan rice as far as the Iranian authorities are concerned and there is therefore no real threat posed by Pakistan to Indian rice exporters to Iran either. Pakistan tend to only serve the rice import needs of counties in Iran which are along its borders.

Riceoutlook: The Demand for 1121 is reducing because of Iran’s ban? Would this ban will impact global prices and stocks?

M.Pakzad: If the ban does continue for a significant period of time, Basmati 1121 rice price in India will be affected. However, it is unlikely that matters will ever get to this since this is only a temporary stock-clearance measure by Iran and import should resume around February 2015.

Riceoutlook:Will India lose its basmati aroma in Iran? Final Views if we talk 10 year down the line.

M.Pakzad: Iran has around 2.2 million tons of rice consumption per year. 750000 to 1million tons are covered by internal production. This means Iran will always need 1 to 1.2 million tons of rice to be imported. Furthermore, self-sufficiency is unlikely to ever happen simply because Iran does not have the water resources necessary for this. Some attempts have been made to produce rice near Urumieh lake, but the government is trying to stop this because it is draining the lake. So the geographical conditions in Iran will never permit 100% self-sufficiency in rice.

We thanks Mnr Pakzad for his valuable comments on Iran’s rice import.We hope that soon Iran will Resumes its ban.